What Is An Undertaking In Australia?

When you’re building a startup or running a growing small business, you’ll probably hear the word “undertaking” at some point - from a landlord, a supplier, an investor, a regulator, or even during a dispute.

It can sound informal, like a quick promise you make to keep a deal moving. But depending on the context, an undertaking can carry real legal and commercial consequences for your business.

So, what is an undertaking, and when should you agree to one?

In this guide, we’ll break it down in plain English, with a practical focus on how undertakings show up in day-to-day business (and how to avoid agreeing to something that creates unnecessary risk).

What Is An Undertaking In Australia (And Why It Matters For Your Business)?

In simple terms, an undertaking is a commitment to do (or not do) something.

For Australian startups and SMEs, an undertaking usually shows up as:

• a written promise you give to another party to progress a transaction or resolve a disagreement;
• a formal commitment given to a court; or
• a formal promise offered to a regulator (for example, to address alleged non-compliance).

The key issue is that undertakings can sometimes be enforceable - meaning that if you don’t follow through, you may face legal consequences, financial exposure, or reputational damage. Whether an undertaking is enforceable will depend on the context, the wording, and who it’s given to.

If you want a deeper explanation of how the term is used in practice, this is also covered in undertaking.

Is An Undertaking The Same As A Contract?

Not always.

An undertaking can be:

• contractual (part of a contract, or a standalone contract);
• non-contractual but still enforceable (for example, given to a court); or
• a commercial commitment that may not be intended to be legally binding (which is where disputes often begin, especially if it’s vague or later relied on by the other side).

Whether it is legally binding depends on how it is given, who it is given to, and what the document (or message) says. If you’re unsure whether a particular promise is intended to be enforceable, it’s worth understanding what makes a contract legally binding, because similar concepts often come up when disputes about undertakings occur.

Why Do Undertakings Come Up So Often For Startups And SMEs?

Because startups and SMEs move quickly - and you’re often trying to keep a deal alive, protect relationships, or resolve issues without a full-blown legal process.

Undertakings are common when:

• you need to give someone comfort that a risk is being addressed (for example, “we’ll fix this by Friday”);
• you want to avoid a longer document (like a settlement deed) for something “simple”;
• there’s a time-sensitive transaction and parties want a short, immediate commitment; or
• a dispute is brewing and you want to stop things escalating.

The catch is that what feels “simple” at the time can become expensive later if the undertaking is vague, unrealistic, or not properly documented.

Common Types Of Undertakings Your Business Might Be Asked To Give

In the small business world, undertakings tend to fall into a few common buckets. Understanding which one you’re dealing with helps you gauge risk and decide what (if anything) needs to be documented more formally.

1. Commercial Undertakings Between Businesses

This is the most common category for startups and SMEs.

Examples include:

• Delivery and performance: “We undertake to deliver the first batch by .”
• Fixing defects: “We undertake to remedy the issues within 10 business days.”
• Payment commitments: “We undertake to pay the outstanding invoice in instalments.”
• Confidentiality: “We undertake not to disclose your pricing / customer list / source code.”

These undertakings often appear in emails, letters, or short side agreements. They can also sit alongside (or be incorporated into) a larger agreement. Depending on the circumstances, some will be legally binding and some will be more of a “good faith” commercial commitment - so it’s important not to assume either way.

2. Undertakings As Part Of A Dispute Resolution

When there’s a dispute - even a small one - an undertaking can be used to “hold the line” while parties negotiate.

For example:

• a supplier undertakes not to terminate supply while you pay arrears over time;
• you undertake to pause a marketing campaign while a branding dispute is investigated;
• both sides undertake to preserve documents while negotiations are ongoing.

Sometimes this is enough. Other times, what you actually need is a more comprehensive document (with releases, confidentiality, and agreed steps if things go wrong). That’s where a Deed of Settlement can be the safer option.

3. Court Undertakings

A court undertaking is a promise made to a court. This tends to come up if your business is involved in litigation and wants to avoid (or replace) a court order on certain issues.

Because these undertakings are given to the court, failing to comply can be treated seriously. Even if you’re trying to keep costs down, this is not the kind of undertaking you want to treat like a casual agreement.

4. Regulatory Undertakings

Regulators may accept undertakings from businesses as a way to address compliance concerns without going straight to prosecution or court.

What matters for your business is that regulatory undertakings are usually formal and detailed, and may involve:

• committing to stop (or change) certain conduct;
• committing to future compliance steps (training, audits, process changes);
• reporting back to the regulator within strict timeframes; and/or
• customer remediation (refunds, notices, corrective advertising).

Some regulatory undertakings may also include admissions or agreed statements of fact - but that isn’t automatic, and the wording really matters. If you’re ever in this situation, it’s worth getting advice early - not only on the undertaking itself, but also on your wider compliance and risk strategy.

Are Undertakings Legally Binding? What Happens If You Breach One?

The legal impact of an undertaking depends on the context, but the commercial reality is simple: if you commit to something and then don’t do it, you’re exposed - even if the argument later becomes whether it was enforceable, what it meant, or what the other side relied on.

That exposure may look like:

• a breach of contract claim (if the undertaking forms part of a contract, or is itself a contract);
• injunctions or urgent court applications (if the undertaking relates to ongoing conduct, like IP, confidentiality, or restraint issues);
• damages (money claimed for loss said to be caused by your non-compliance);
• termination rights under an existing agreement (if your undertaking was a condition of continued performance); and
• regulatory consequences if the undertaking is given to a regulator (including enforcement action if the undertaking is breached).

Practical Red Flags: When An Undertaking Is Riskier Than It Looks

We often see undertakings become a problem when they are:

• too broad: “We undertake to resolve all issues immediately” (what issues? what does “resolve” mean?)
• unrealistic: timeframes that don’t match your operational reality
• open-ended: no expiry date, no clear trigger for completion
• given by the wrong party: someone promises something on behalf of the business without authority
• silent on consequences: no agreed process if something changes (for example, supply delays, cashflow issues, or third-party dependencies)

If an undertaking is being given “to keep things moving”, it’s worth pausing and checking whether your business actually has the capability - and the authority - to comply.

This is also where it can help to clarify who has authority to bind the business in the first place. Depending on your structure and circumstances, tools like an Authority to Act Form (or clear internal delegations and written approvals) can reduce the risk of team members unintentionally committing the business to obligations you can’t meet.

How To Draft (Or Review) An Undertaking: A Practical Checklist

If you’re being asked to sign an undertaking, the goal is not to overcomplicate it - it’s to make it clear, realistic, and aligned with your commercial objectives.

Here’s a practical checklist you can use before you agree.

1. Be Specific About What You’re Promising

Avoid vague undertakings like “we’ll fix it” or “we’ll comply”. Instead, define:

• what action will be taken (and by who);
• what deliverable is expected (a document, a payment, a repair, an update); and
• what standard applies (for example, “in accordance with the agreement”, “to a reasonable standard”, or “as specified in schedule X”).

If there is already an underlying contract, check that the undertaking is consistent with it. Otherwise, you may accidentally create conflicting obligations.

2. Set Clear Timeframes (And Build In Breathing Room)

Timeframes are often where undertakings fail. If you’re dependent on:

• a subcontractor,
• a third-party platform,
• a shipping provider, or
• an internal product release cycle,

make sure your undertaking reflects that reality.

You can also add a practical buffer, such as “within 10 business days” rather than “by Friday”, especially if weekends, public holidays, approvals, or external dependencies are involved.

3. Include Assumptions And Conditions If Needed

Not every undertaking should be unconditional.

For example, you might only be able to provide a refund if goods are returned, or only be able to deliver if you receive final artwork approval. If those dependencies exist, include them.

If circumstances can change (which is common in fast-moving startups), you may also want a pre-agreed mechanism to update the commitment. This is where a Deed of Variation (or a simpler written variation clause, depending on the situation) can be important, so that updates are documented properly rather than argued about later.

4. Clarify Whether It’s Confidential (And Protect Your IP)

Some undertakings are given in sensitive contexts - disputes, customer data issues, product roadmap discussions, or investment negotiations.

If confidentiality matters, don’t assume it’s implied. Make it explicit, and consider whether a standalone confidentiality arrangement is needed. In many commercial relationships, a Non-Disclosure Agreement is a cleaner way to handle confidentiality than squeezing confidentiality promises into an undertaking that’s really about performance or payment.

5. Think About Remedies And “What If It Goes Wrong?”

This isn’t about being pessimistic - it’s about running a business responsibly.

Ask yourself:

• What happens if we can’t meet the deadline?
• Do we want a cure period (time to fix the breach)?
• Is there a requirement to notify the other side early?
• Will we be liable for consequential loss, or is liability capped?

Many disputes happen because no one agreed on the “plan B”. Building that into the drafting can save you time and cost later.

When Should You Use An Undertaking (And When Should You Use Something Else)?

Undertakings can be useful - but they’re not always the best tool.

Undertakings Work Well When…

• the issue is narrow (one action, one timeframe, one outcome);
• both sides are cooperative and the undertaking is mainly about speed and clarity;
• you’re bridging a short gap (for example, “we’ll provide the certificate by Monday”); or
• you need a quick interim solution while a longer agreement is prepared.

You May Need A Different Document When…

• there is a dispute and you want finality (for example, releases, confidentiality, and non-disparagement);
• money is changing hands and you need clear payment terms and default consequences;
• multiple obligations are being traded (for example, refunds + return of goods + IP restrictions); or
• there are ongoing business relationship terms that need structure (like service levels, renewal, termination, IP ownership).

In those situations, an undertaking can be too thin - and you may be better protected with a more comprehensive agreement.

A Common Startup Example: Founder Commitments And “Internal Undertakings”

Startups sometimes use the word “undertaking” internally - for example, a founder “undertakes” to hit milestones, contribute IP, or avoid competing ventures.

The risk is that informal “handshake” commitments often don’t hold up when:

• your cap table changes,
• investment discussions begin, or
• there’s disagreement about who owns what or who promised what.

If you have multiple founders (or expect to bring in investors), it’s often more practical to put the key commitments into a document designed for that purpose - for example, a Shareholders Agreement (and related documents) rather than relying on informal undertakings that are hard to enforce and easy to misunderstand.

Don’t Forget The Compliance Layer

Even if an undertaking is “private” between your business and another party, it can still intersect with your compliance obligations - especially if it relates to customers or marketing.

For example, if you undertake to provide refunds, repairs, replacements, or specific product outcomes, you also need to ensure you’re aligned with the Australian Consumer Law and that your communications aren’t misleading.

If your undertaking involves handling personal information (like customer complaints, identity checks, or mailing list changes), make sure your processes and documents support that, including an appropriate Privacy Policy.

Key Takeaways

• In business, an undertaking is a commitment to do (or not do) something, and it can create enforceable obligations depending on the context and wording.
• Undertakings are common in fast-moving startup and SME situations - especially for delivery, payment plans, defect fixes, confidentiality, and dispute “stop-gap” solutions.
• The biggest risks usually come from vague wording, unrealistic deadlines, and unclear authority (who is actually allowed to bind the business).
• A well-drafted undertaking should be specific, time-bound, realistic, and clear on conditions, confidentiality, and what happens if things change.
• For disputes or complex arrangements, an undertaking may be too limited - you may be better protected with a settlement deed or a more detailed contract.

Note: This article is general information only and does not constitute legal advice. Undertakings can have different consequences depending on the circumstances, so it’s best to get advice on your specific situation.

If you’d like a consultation on an undertaking for your startup or small business (whether you’re drafting one, negotiating one, or worried about complying with one), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.